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CRA audits of charities look fair but feel foul

Conservative government assures Canadians that political activity audits for charities are fair and neutral, but evidence suggests otherwise.

There has been much speculation as to how the Canada Revenue Agency chose which charities to audit, since many of the groups involved have opposed Conservative policies. (Sean Kilpatrick / THE CANADIAN PRESS file photo)

By Don McRae

Sun., April 5, 2015

Beginning in 2006, the Conservative government orchestrated a series of initiatives to cut support to charities and voluntary organizations. Programs were eliminated, funding was reduced or delayed for months and third-party research support, like the National Council on Welfare, was eradicated. The tone of relations with these groups changed dramatically.

Having dealt with direct federal funding of groups, the government turned next to indirect funding through charitable status. Conservative rhetoric created a chilly climate for free speech, as then-Natural Resources minister Joe Oliver labelled environmental groups “radicals” serving foreign interests. The 2012 budget gave the Canada Revenue Agency $8 million, later topped up to $13.4 million, to conduct 60 political activity audits of charities.

Since then, there has been much speculation as to how the CRA chose the audit targets, since many of the groups involved have opposed Conservative policies. The government says the selection process for these audits is fair and neutral, with no political interference. We don’t know because the CRA cannot identify the charities under audit, as this is confidential under the Income Tax Act.

About 20 groups have been identified in the media as being audited. Information from these groups, the CRA 2014 Charities Program Update, and the charities data base raise a number of questions. Too many aspects of the process suggest that something else is at work.

The Charities Program Update states that one of the factors in building the audit plan was that groups from all four charitable categories were audited. (The categories are relief of poverty, advancement of education, advancement of religion, and other purposes of benefit to the community.)

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As of Jan. 31, 2014, there were 31 files under audit. Twenty-two of the 31 audits were community benefit groups (where environmental, social justice and human rights groups are found). This segment, which is 23.3 per cent of all charities, makes up 71 per cent of the 31 audits. There appears to be no cause for an over-representation of these groups as they make up only 18.5 per cent of all charities revoked for cause since 1967.

In a Canadian Press story last August, the director general of the charities directorate, Cathy Hawara, explained the audit selection process. She said the CRA considered formal complaints from citizens, lobby groups, MPs or even cabinet ministers. (Having a complaint from a minister raises questions about the selection process.) These external complaints led to 30 “leads” to investigate.

From 2008-09 to 2010-11, there was an average of 24 such complaints to the CRA each year. This went up to 139 complaints in 2011-12 and 159 the year after that. Ethical Oil, the lobby group with Conservative ties that encourages “people, businesses and governments to choose Ethical Oil from Canada’s oilsands,” made several complaints and at least five of these groups are being audited.

Of the 20 self-identified charities, 11 do some work on environmental issues and seven work on social justice or international development. Seven of the 20 have had their federal funding eliminated since 2006. KAIROS, the group that was famously not recommended by the former CIDA minister Bev Oda, is being audited under the auspices of the United Church of Canada. Four other groups identified on the church’s website as partners are being audited. Some of the audits have taken years, draining staff time, resources and energy from the organizations.

The Conservative government has assured Canadians that the system of political activity audits is fair and neutral. The limited evidence we have suggests a different conclusion. To paraphrase Frodo in The Lord of the Rings, the system looks fair but feels foul.

There are two major losers in this process. The first are Canadians, who will not benefit from the research, experience and advice of Canadian charities. The second is the CRA, which must defend what appears to be a stunted and warped selection process by finding new ways to say “trust us.”

Don McRae is a former federal public employee who worked for more than 30 years with charities and voluntary organizations.

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